Market Outlook Winter 2023

The last quarter followed the same pattern the previous three as inflation and central bank interest rate decisions dominated markets. Encouraging inflation data raised hopes that inflation is peaking as price rises in the UK, US and Europe showed the first signs of slowing down.

Central banks continued to raise interest rates, but the pace has begun to slow. In December, the US Federal Reserve, the Bank of England and the European Central Bank all increased rates by 0.5% - down from 0.75% at previous decisions. Markets have been looking for clues about when central banks will pause or even reverse recent rate hikes. As economic data continued to deteriorate markets started looking to the rising chance of recession – for the UK there is general acceptance it is already here – as a reason for central banks to change course.

Equities and bonds rose in value and clawed back some of the losses from the first half of the year, although volatility remained a feature of most markets. Central banks have been warning about underestimating their determination to keep monetary conditions tight in order to control inflation. Developed equities have been more receptive to this message

as markets fell over the course of December, despite smaller interest rate hikes. Emerging market equities gained as Chinese markets have benefitted from the country abandoning its strict zero-Covid policy.

Winter Outlook 2023.pdf

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This message is the opinion of Velarium Wealth and contains a document produced by FE Investments that we feel is relevant at the current time. This document has been prepared for general information only and is not guaranteed to be complete or accurate. It does not contain all of the information which an investor may require in order to make an investment decision.